2012-06-28

I found an interesting section in a nice intermediate textbook on General Equilibrium Theory by Ross M. Starr:

In Section 18.4 titled "Uzawa-Equivalence Theorem" shows the equivalence of two existence theorems:

The existence of equilibrium in an economy characterized by a continuous excess demand function fulfilling Walras' Law

The Brouwer Fixed-Point Theorem

Interestingly, the two apparently distinct results are mathematically equivalent, which is originally shown by Hirofumi Uzawa (1962) in his short note: "Walras' Existence Theorem and Brouwer's Fixed Point Theorem." Economic Studies Quarterly, 8: 59-62.

The importance of the theorem is stressed by Prof. Starr as follows:

What are we to make of the Uzawa Equivalence Theorem? It says that use of the Brouwer Fixed-Point Theorem is not merely one way to prove the existence of equilibrium. In a fundamental sense, it is the only way. Any alternative proof of existence will include, inter alia, an implicit proof of the Brouwer Theorem. Hence, this mathematical method is essential; one cannot pursue this branch of economics without the Brouwer Theorem. If Walras (1874) provided an incomplete proof of existence of equilibrium, it was in part because the necessary mathematics was not yet available.

2012-03-16

I found a nice introductory description of auction from the viewpoint of economics or game theory in the following textbook on auction theory:

The below is the (partial) quotation from the chapter 2.3.1, titled "What is an Auction?":

[A]uctions Have become an effective tool to implement public policy. Their use now ranges from the allocation of radio spectrum necessary for mobile communication, to spot markets trading electricity and pollution permits, as well as being widely used in government procurement.

We can now define an auction by one of its central properties: as a market clearing mechanism, to equate demand and supply. Other market mechanisms include fixed price sales (as in a supermarket) or bargaining (as in the negotiated sale of a house or a used car). Within the class of market mechanisms which allocate scarce resources, one particular characteristic of the auction is that the price formation process is explicit. That is, the rules that determine the final price are usually well-understood by all parties involved.

Auctions are often used in the sale of goods for which there is no established market. Auctions were instrumental in the mass privatization in Eastern Europe given the absence of a price system that could guide the valuation process for firms being privatized. Rare or unique objects are typically sold in auctions as the markets for these objects are likely to be very thin. However, auctions are also used to sell Treasury bills and the markets for these assets are very thick. The reason is that only governments can legally produce such bonds and therefore the sale in an auction is an exercise in revenue maximization.

Auctions are more flexible than a fixed price sale and perhaps less time-consuming than negotiating a price. Auctions are used to sell hundreds of goods, such as bales of wool or used cars, in a few hours. One can imagine how many hours it would take to sell 100 used cars through negotiated sales.

My research focuses on Business Economics and Game Theory with a primary interest in Market Design. My research papers are published in leading economics journals, including the American Economic Review and the American Economic Journal, as well as leading journals in other related fields such as AAMAS and Artificial Intelligence.